The Strategic Use of Corporate Philanthropy: Evidence from Bank Donations*

Seungho Choi, Raphael Jonghyeon and Simon Xu

Review of Finance, 2023, vol. 27, issue 5, 1883-1930

Abstract: This article examines the strategic nature of banks’ charitable giving by studying bank donations to local nonprofit organizations. Relying on the application of antitrust rules in bank mergers as an exogenous shock to local deposit market competition, we find that local competition affects banks’ local donation decisions. Using county-level natural disaster shocks, we show that banks with disaster exposure reallocate donations away from nonshocked counties, where they operate branches, and toward shocked counties. The reallocation of donations represents an exogenous increase in the local share of donations in nonshocked counties for banks with no disaster exposure and leads to an increase in the local deposit market shares of such banks. Furthermore, banks can potentially earn greater profits from making donations and tend to donate to nonprofits that have the most social impact. Overall, our evidence suggests that banks participate in corporate philanthropy strategically to enhance performance.

Keywords: Corporate philanthropy; banking (search for similar items in EconPapers)
JEL-codes: D64 G21 L31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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